June 29, 2014 00:00 By Somluck Srimalee
Group aims to take contract farming to North and Northeast
Working together to develop both their group’s business and the quality of life of farmers’ are the main operating objectives of the Dao-Heuang Group, a major Laotian company specialising mainly in coffee.
The group’s vice-president Boonheuang Litdang said the group had set up its first business in 1991, a retailer in a duty-free shop in Laos.
“[It] imported products for sale, while the Laotian government’s policy was to create jobs in the country. So, when we imported products, we [also] had to create business activity for export. This would balance the country’s trade figures,” she said.
To comply with government policy, the group decided to invest in a coffee business in 1998. The project progressed from growing coffee plants up to processing the coffee beans for ready-to-drink coffee for export.
Heuang Litdang, the group’s president, said she started by clearing a forest area of 1,500 rai of the Bolaven plateau at Pakse in Laos for a coffee plantation. Then the group set up a contract farming system and provided coffee plants, knowledge of how to care for them, and planting materials such as fertilizers and coffee beans.
From 1998 until now, the group has had farmers joining in the contract farming - some 2,000 families of about 6,000 farmers.
The participants now generate income of over Bt1 million a year – compared to the earned average of Bt100,000 a year before the launch of the group’s contract farming.
In addition to the coffee business, the group has expanded its investment to dried-fruit products for the export market. It also supports local farmers in growing fruit. The dried-fruit plants help to maintain fruit prices across the seasons.
“Farmers will get the best price for their products, while the government does not need to subsidise them. This is the way to create a sustainable business for our group and our related partners, especially farmers,” Boonheuang explained.
Dao-Heuang Group also plans to use its business model to support not only Lao farmers but also Thai farmers in the North and Northeast. It will negotiate contracts with these coffee growers to plant coffee on a 1,000-rai plot of land in the North.
The group also is negotiating with farmers in Ubon Ratchathani to grow taro – up to 1,000 rai – to support its dried-fruit products, also through contract farming .
This move is part of the company’s plan to boost its production capacity to meet rising demands once the Asean Economic Community (AEC) is launched in 2015, the group’s vice president Boonheuang Litdang said yesterday.
“We will be growing coffee in Thailand in order to serve the rising demand in Asean countries,” she said.
Following its business model for a social enterprise firm, the group has succeeded in recording total revenue of US$160 million last year and expects to double that to $320 million by 2018.
Up to 80 per cent of the group’s revenue comes from its coffee business, and the rest from its other businesses such as duty free, hotels, retail and property in Laos.
Of its coffee revenue, 80 per cent comes from exports. The company sells coffee to Japan, the United States, Europe, China, Vietnam, Myanmar and Cambodia, both under its own brand, Dao, and those of its customers, which account for up to 80 per cent of the total.
“When we expand our business, not only does it grow – but all of our business partnerships including farmers, staff, suppliers, and distributors will grow together with us. This is our business strategy – to be a social enterprise for sustainable growth in the long term,” Boonheuang said.